Today, access to quality investment opportunities are no longer a luxury reserved for the well-connected. Everything from startups to real estate development projects are now available to the masses for investment. This access has garnered lots of attention from prominent investment thought leaders. One of the biggest issues they’re grappling with is how to educate the public to make sure they are investing responsibly in these new, often risky asset classes.

In this post, we’re going to talk about what Brad Feld refers to as a new, official trend in the world of venture capital.

The Opportunity

What’s this new trend we speak of? In January 2011, Union Square Ventures launched their first “Opportunity Fund.” The fund was formed to invest exclusively in USV portfolio companies raising follow-on rounds of investment. This investment strategy was born out of the realization that a majority of returns in a fund are generated by a small number of the portfolio companies. Fred Wilson, USV’s founder and managing partner described the rationale behind launching the fund in 4 basic points:

“This fund is meant to complement our core funds, not take us in a new direction. The availability of this additional investment vehicle will allow us to:

1) Continue to invest in our most established and successful companies
2) Invest in more established networks that have been funded initially by others
3) Invest in special situations like the spin out of a network of scale
4) Respond to attractive opportunities as the broader market continues to evolve.”

USV may have been the first, but since 2011, The Foundry Group, Greycroft Partners, YCombinator, DFJ, and others have jumped on the bandwagon, raising their own opportunity funds.

Let’s focus on Fred’s 1st point.

Investing in Established, Successful Companies

Most startups will raise multiple rounds of investment throughout their lifecycle. If the company is performing well, they will raise future rounds at a higher price point, or valuation (also known as “up rounds”). Perhaps the most important deal term often negotiated by early stage investors is preemptive rights. A preemptive right grants an investor the option to maintain their current ownership in a company, by investing an additional pro-rata amount of any new stock issued.

Let’s plug in some numbers:

Steve owns 10% of a startup called ZMS. ZMS is performing really well and is approached by a new investor to lead a $10M series B round of investment. As an investor in the series A with preemptive rights, Steve now has the right to invest an additional $1M into the series B, in order to maintain his 10% ownership.

While the risk factors are still very real at this point, some of the guesswork is removed. As an investor with preemptive rights, you can choose to only participate in investment rounds in companies that are performing well and showing promising traction. 500Startups’ Dave McClure’s investment strategy could not be more relevant than in this case: Invest before product/market fit, double down after.

John Backus of New Atlantic Ventures, describes the fierce competition between funds to get into to top performing companies.

Every venture firm wants to invest in the handful of companies that generates the highest return. They compete vigorously for the chance to invest in these companies. Those who pioneered opportunity funds recognize that, while everyone competes to invest in the best companies, there is a better way to get access to these very best companies – and that is to already be an existing investor.”

With this basic understanding of investment rounds and preemptive rights, we can now better formulate the real value-add of follow-on funds: leveraging preemptive rights to gain access to companies hitting their major milestones and aggregating these up rounds into one fund product.

Diversification

Diversification is a topic that our team has covered pretty extensively and one that, frankly, cannot be stressed enough. Investing in a diverse group of companies has been statistically proven to improve the probability of a profitable portfolio.

By building a portfolio, your bottom line is protected from single company risk. This basic investment principle is what makes investing in a fund so appealing. Your returns are based on the performance of the entire fund, meaning the diversification is inherently built in. Investing in a fund of follow-on rounds, companies who have grown out of their infancy, gives investors both diversification, and exposure to lower risk, later stage startups.

Case Studies

As we mentioned earlier in this post, even though opportunity funds are a relatively new product offering, lots of funds have picked up on the trend, raising their own funds:

Union Square Ventures ($135M): After passing on follow-on rounds in Zynga and Twitter due to lack of capital, USV became the first in the pack to raise an opportunity fund.

Foundry Group Select Fund ($225M): The fund is currently showing an impressive 116.07% IRR according to Pitchbook. This is the highest performing IRR of any previous Foundry Group fund.

Y Combinator Continuity Fund ($700M): With over 1,000 companies in the Y Combinator portfolio, CEO Sam Altman decided to raise a $700M fund to invest in all YCombinator follow on rounds, below a $300M valuation.

Greycroft Growth Fund ($200M): According to co-founder and managing partner, Ian Sigalow,the $200M growth fund was raised to have “the ability to have dry powder to support our best companies.”

Introducing OC²

With over 100 companies in the OurCrowd portfolio, the next natural step was for us to launch our own opportunity fund, which we’ve referred to as a “continuity fund.” This fund allows OurCrowd’s investors to gain exposure to the some of the best performing OurCrowd portfolio companies, whose progress we’ve been able to track since our first investment.

OC² invests in OurCrowd portfolio companies raising up-rounds, led by other institutional investors. One of our core investment philosophies is what we refer to as sponsorship. Investing alongside great co-investors, at a higher valuation, is an additional vote of confidence in a company’s strong, positive momentum.

Happy holidays and welcome to December’s edition of What We’re Investing In. By the end of 2015, there will be over 85 companies in the OurCrowd portfolio. In one month from today, we’ll kick off our 2nd annual Global Investor Summit in Jerusalem to discuss future investment and tech trends while reviewing the incredible innovation we’ve seen in the last year. Register here; we hope to see you!

Here is a summary of all of the currently funding companies on the OurCrowd platform.

Smart Agricultural Irrigation

The Internet of Things is one of the most popular startup trends whose simple goal is to connect ordinary “things” to the internet. This company takes the mostly un-technological process of farm irrigation and streamlines it through an intuitive mobile application. The app instructs farmers to deploy sensors throughout their field, which then continuously analyze the surrounding soil and its specific needs. The information collected is transmitted to the farming equipment, automatically populating it with the optimal inputs. Aside from the farmer’s valuable time, this technology can save up to 25% of the extra water typically used to irrigate fields, dramatically cutting costs and increasing margins.

Digital Vaccine for Diabetes

There are 21.9 million diabetics in the United States alone. In 2014, 11% of healthcare expenditure on adults was attributed to costs relating to diabetes. In order to begin to solve the diabetes epidemic, this company has decided to focus on an even larger population of individuals classified as “pre-diabetic.” Using an accurate prediction engine, the company can assess individualized diabetes risk and conversion time horizon. The prescription only mobile application also includes a behavioral modification engine, which acts as a digital health coach. These small lifestyle changes suggested by the app have been proven to show drastic results in decreasing the likelihood of developing type 2 diabetes.

Cooling Commercial Buildings with Submarine Technology

Commercial buildings spend a huge amount of resources to maintain safe carbon dioxide levels. Traditionally, buildings replaced indoor air with fresh, outdoor air, a process that consumes a huge amount of energy and represents a large portion of a building’s overall energy costs. This company uses a proprietary technology to eliminate CO2 by recycling the air in a building instead of replacing it with air from outside. This revolutionary approach can save buildings up to 40% annually on their heating and cooling energy costs. The technology used in these systems were originally developed to maintain air quality in submarines and space stations.

Bringing Brick and Mortar Grocers Online

One of the latest brick and mortar business to move online is supermarkets. Huge retailers have been losing their once-loyal customers to intermediary brands like Instacart and Fresh Direct. The thesis of this company is simple. Empower brick and mortar grocers to keep their customers even as they migrate online. This turnkey solution provides a full-fledged online shopping experience with on-demand grocery delivery and pickup.

Welcome to the November edition of What We’re Investing In. For all the first time readers, every month we compose a summary of all the currently funding investment opportunities on the OurCrowd platform. This month, we’ll take a look at four companies ranging from a fast growing car rental business to a “free-dimensional” video technology company. To find out more details about these companies, join and accredit at www.ourcrowd.com.

Hyperlocal, on-demand car rentals in India

The sharing economy is one of the fastest growing segments in the tech world today. Pair that with the unprecedented growth of recent Internet penetration in India (350M people online and growing), and you’re looking at a market ripe with opportunity.

This particular company is capitalizing specifically on an opportunity in the private transportation market in India. The majority of the Indian population that can’t afford to buy their own cars currently rely on chauffeured ride-sharing applications like Uber or Ola Cabs. This company allows its customers to rent cars through an intuitive mobile app, pick up the car at one of hundreds of local spots in various major Indian cities, unlock the car with their phone, and drive away. The company launched with seven cars in 2013 and now owns a fleet of over 1,800 cars.

Turning the average employee into a data analyst ninja

OurCrowd is investing in a leading business intelligence software company that removes the dependency and need for expensive data scientists. Large organizations are looking to leverage the ever increasing amount of collected data to gain a competitive edge. Because the current process of translating data into coherent insights is so IT driven, companies end up waiting a long time for information that will help them make informed business decisions.

This company allows any member of a company to process data without a line of code and in a matter of minutes. The platform is extremely cost efficient, eliminating the need for consulting data scientists, and providing instant insights that can lead to more immediate ROI.

Leveraging underutilized computer memory for secure data storage

Israel has become renowned for its thought leadership in most of the major industries being innovated today. Data storage is one particular area that Israeli entrepreneurs have excelled in.

OurCrowd is investing in an Israeli storage company addressing the multi-billion dollar, on-premise storage market. While there are tons of companies focused on cloud-based solutions, this company is utilizing available memory on computers throughout a company’s network to store both structured and unstructured data. This approach has two unique advantages over existing solutions. Firstly, because the data is being stored on a company’s in-house computers, the need to invest in data storage hardware is essentially eliminated. Secondly, spreading encrypted data throughout thousands of company computers eliminates the cyber security risks associated with cloud-based solutions.

Free-dimensional video tech for improved sports viewing

For all the sports fans out there, this one’s for you. Imagine watching a football game and being able to see the field from the point of view of the quarterback, as he dissects the defense, scheming to craft the perfect play. By installing ultra HD stationary cameras around a stadium, this company is able to capture any moment in 3D, providing a qualitatively better viewing experience for the spectator. Instead of watching one replay from 5 different angles, you can get one 360° reenactment of the given moment. This technology has applications in multiple markets, such as coaching and analysis, broadcasting, and virtual reality.

Venture capital activity dropped in the first quarter of 2015. For the first time since 2011, under 900 deals received funding from venture capital firms.

Equity crowdfunding, on the other hand, continues to see a steady, impressive rise in dollars invested. According to Crowdnetic’s Eric Smith, the young equity crowdfundung market is poised to double every year, as more and more individual investors learn about the opportunity.

This June at OurCrowd, in addition to launching three new investment opportunities, we also launched our first early-stage fund. Check out highlights of all the currently funding OurCrowd companies in this month’s edition of “What We’re Investing In.”

OurCrowd First

Finding promising early stage investment opportunities is an art. To find the right companies, the OurCrowd investment team sifts through upwards of 150 startups per month. Often, due to the size of the round or the maturity of the company, they are forced to pass on great, early stage opportunities.

To address this, for the first time on the OurCrowd platform, we are offering an opportunity to invest in a fund composed of early stage startup companies. The fund will make 20+ investments, ranging between $300K and $500K.

The fund model has numerous benefits over investment in individual companies. Investing in a fund allows investors to build a robust, diverse portfolio with one single commitment. Returns are also based on the performance of the entire fund, which greatly increases your chances of profitability.

OurCrowd First is being managed by serial entrepreneurs Eduardo Shoval and Yori Nelken. Both Eduardo and Yori have exited numerous companies and have served as mentors, coaches, and board members of startup companies.

Influitive

Influitive is the leading B2B advocate marketing software that enables companies to mobilize their advocates into brand ambassadors. Customer advocacy is by no means a new phenomenon. Satisfied customers are usually happy to share your product or service with a friend, with no real incentive. The Influitive solution allows companies to both encourage advocacy, and reward individuals for their efforts. The platform is gamified and points accrued can be used for rewards and preferential treatment with the company running the advocate hub.

Influitive is a company we know well. We’re not just investors, we’re also paying customers. OurCrowd has been using Influitive internally for the past few months to power employee advocacy and we are in the process of sending out our first batch of invites to members of our investor community. We were so impressed with the product and the overall opportunity that we aggressively pursued an investment in this round.

This is CEO and founder Mark Organ’s second venture in the marketing software space. Eloqua, his previous company was sold to Oracle for $871M.

Stringify

The Internet of Things (IoT) is one of the hottest startup segments in the tech world today. There are currently an estimated 14 billion connected devices globally, translating into billions of dollars of revenue for IoT companies. Stringify, formerly known as Milla, is quickly becoming the marketplace for developers and consumers to connect internet enabled devices on any operating system.

The Stringify design studio allows individuals with no technical background to customize how their smart devices interact with each other. An example flow using Stringify would be, “At 8PM when I close the door to my bedroom, dim the lights, lower the temperature by 5%, and play calming music.” These flows are saved in Stringify’s marketplace and can be purchased by other smart device enthusiasts.

Stringify’s impressive management team brings years of experience from companies such as Cisco, JPMorgan Chase, and SanDisk. OurCrowd first invested in Stringify in October 2014.

HeroX

Today, anything from weddings, to charities, to life-changing technologies, any project can be crowdfunded. HeroX, an incentive-prize competition platform is doing the exact opposite of crowdfunding. Since the early 1900’s, people have been hosting competitions to inspire innovation. In 1919, Raymond Orteig, a New York based hotel owner offered $25K to the first person who created an airplane that could fly from New York to Paris directly. 8 years later, Charles Lindbergh claimed the prize in his aircraft Spirit of St. Louis. Research shows that a well structured competition with the proper incentives can encourage teams to invest 10X the prize amount to declare victory over competing teams.

Peter Diamandis, co-founder and director of HeroX, is also the founder and chairman of the X Prize Foundation, one of the original incentive competition platforms. Peter and fellow HeroX co-founder Emily Fowler, who also worked at XPRIZE, realized that they were passing up on great organizations who were too small to host competitions with the XPRIZE. That realization gave birth to HeroX, an online platform capable of hosting smaller scale, yet equally as important prize based competitions.

Diversification is one of the most basic and important principals of investing. This April, we launched a broad range of companies across a multitude of industries on OurCrowd’s platform. These span from cutting-edge brain technology to the world’s first meter-dosed medical cannabis inhaler. For more information on all of our currently funding companies, visit the site and click the “Browse Startups” tab.

Below, read about five of the companies we’re investing in this April on OurCrowd; for an under-the-radar investment, log in on www.ourcrowd.com.

Syqe Medical

Syqe Medical is the world’s first meter-dosed, medical cannabis inhaler. Today, doctors have no way to measure the intake of prescription cannabis to patients, which directly impacts the affectivity of the prescription. Syqe is getting in at the ground floor of what is projected to be an $11B legal cannabis market in the US alone. Perry Davidson, founder and CEO of Syqe, has over 9 years of experience in controlled substance regulation and state implementation in Israel.

ElMindA

Over 2 billion people worldwide live with some form of a brain-related disorder. Early intervention and a better understanding of how the brain functions are critical to addressing this problem. ElMindA developed an FDA and CE-approved, next-generation mapping tool for visualizing the brain’s neural activity. The solution uses a 64 electrode wearable cap to measure neural activity associated with cognitive function, allowing for insights unparalleled by existing brain imaging and evaluation tools. The company has shown impressive early traction, partnering with major US professional sports teams, and is backed by an impressive roster of investors.

Scalabill.it

A huge pain point for software startups today is trying to manage and match proof-of-concept pilots with potential institutional customers. Pilots are costly, time consuming and require special integration with each partner for every single pilot. Scalabill.it is streamlining and securing this process, with plans to become a marketplace for major corporations and technology startups. The Scalabill.it solution requires a one-time integration, which allows them to conduct multiple, simultaneous pilots. Scalabill.it is led by Toby Olshanetsky and Alexey Sapozhnikov, serial entrepreneurs who, between them, are responsible for five exits.

MyAgentFinder

MyAgentFinder (MAF) is a San Diego-based startup that provides high-quality leads for real estate professionals. According to a recent Goldman Sachs report, nearly 90% of real estate buyers and sellers use an agent, equating to an estimated $52B in commissions. MAF’s unique lead generation platform and business model will help deliver higher quality leads and maximize ROI for agents. Founders and brothers David and Avi Tal are both serial entrepreneurs with extensive experience in the real estate sector.

Stealth Mode: Mobile advertising using contextual targeting

Real time ad bidding closely resembles a stock market trading floor, much like one you may have seen in movies like the Boiler Room or Wolf of Wall Street. Companies spend billions of dollars annually using a “spray and pray” method of advertising, trying to hit the right person, with the right ad, at the right time. Serving ads has become even more difficult with the recent yet dramatic move to mobile. Experts project that mobile advertising spend could reach $73B by 2018. One of our latest investments on the OurCrowd platform developed a cutting edge mobile advertising platform that has the ability to deliver precise ads based on real life contextual data. By analyzing billions of data points and machine learning, this company can highly target relevant, potential customers.

Next Steps

OurCrowd is a better way to invest in Israeli and global startups. To find out more about these investment opportunities and others on our investment platform, click here.

Dani Forman

Marketing Manager & Research Analyst

Dani is a marketing manager and research analyst at OurCrowd. He studied economics and political science at Bar Ilan University.

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March is a busy month at OurCrowd: In addition to the new, exciting investment opportunities on the platform, our team has been traveling the world hosting events for the global OurCrowd community. Check out our blog to see the full events calendar and join us on the road in a city near you.

With that, here is a summary of all the currently funding companies on OurCrowd:

XpresSpa – The leading airport spa chain

The frequent-flyers out there should recognize this brand. XpresSpa is the leading airport spa chain, with over 40 locations worldwide. The XpresSpa kiosks are visited by over 1 million passengers every year, who enjoy a wide range of spa services such as massages, manicures, skin treatments and haircuts.

Airport concessions in general are an $8B market that is growing at a rapid pace of 5% annually. XpresSpa plans on capitalizing in this market from two separate revenue streams, consisting of spa treatments and the sales of retail products.

Global Kinetics –Wearable sensor for tracking Parkinson’s disease

Parkinson’s Disease affects over 1 million people in the US alone, costing the economy over $25B annually. Global Kinetics developed a wearable device that provides neurologists and practitioners with real time data on their patient’s symptoms. Their device, the Parkinson’s KinetiGraph (PKG), is a combined data logger and cloud-based software program that can log up to 10 days worth of activity from each individual patient.

So far, Global Kinetics’ device has been approved by the regulatory bodies in the US, Europe, Australia and many Asia-Pacific countries. Andrew Maxwell, Global Kinetics CEO and founder has over 25 years of successful entrepreneurial experience in Australia and Asia.

CrediFi – Bloomberg for commercial real estate

CrediFi is a Bloomberg-like platform for the multi-trillion dollar commercial real estate (CRE) markets. Currently, investors looking to invest in real estate do not have a transparent database that can help them assess risk and make more informed investment decisions.

Using their own proprietary algorithms, CrediFi aggregates data from information on the Internet, public records, and institutional reports. The platform is designed to serve players across the CRE ecosystem, such as banks, private equity funds, property owners, and tenants.

CEO and founder of CrediFi, Ely Razin, is a seasoned financial data executive who sold his last company to Thomson Reuters. We are joined in this round of investment by another large VC as well as several strategic angel investors.

Bat Blue – Cloud-based cyber security solution

Last year, the number of global cyber attacks increased by 48%, driving the annual expenditure on cyber security to grow to over $70B. Bat Blue is addressing this global crisis with a cloud-based platform that provides comprehensive protection for clients across all computers, mobile devices and remote access points.

Using cloud-based cyber security software gives clients multiple advantages over current enterprise solutions, including increased reliability and the capacity to scale the software on demand.

Bat Blue’s customer roster includes household names like ESPN, Disney, Tumblr and NYSE. Babak Pasdar, CEO and founder of Bat Blue, recently published this video explaining how Bat Blue’s proprietary solution could have protected Target and Home Depot against their recent data breaches.

OurCrowd’s portfolio growth is expanding: this month, featured opportunities include innovative companies in the medical technology and cyber security spaces.

Stay tuned – there are more deals to be announced before the end of the month; bookmark this post to view the next deals.

TheraCoat: Hydrogel-based drug delivery

A major pain point for pharmacologists when developing drugs is finding a substance that can efficiently deliver the needed medication before the body’s natural fluids wash it away. TheraCoat’s Intracavity Drug Retention System (ICDR) was created to solve that very problem. Their patent-protected substance liquefies when in cool temperatures and hardens in hot temperatures.

The ICDR is mixed with the necessary drug and taken in liquid form. When the liquid reaches the cavity, body heat causes the substance to harden and stick to the walls of the cavity. This enables the drug to be emitted at a slow, consistent rate, without being washed away by the body’s fluid. So far, TheraCoat has experienced significant early traction, conducting a number of successful test trials and securing regulatory clearance in a number of countries.

OurCrowd is joined by a number of other co-investors, including a major pharmaceutical company, in this round of investment in TheraCoat.

PulmOne: Bringing lung function testing to the desktop

Since the 1950’s, lung function testing was conducted in an expensive phone booth-like structure called “the body box.” Because of the prohibitive size of this machine, physicians have not been able to conduct pulmonology testing in their offices, forcing patients to visit clinics and hospitals to get testing done.

After nearly 60 years without innovation, PulmOne created the MiniBox, a desktop sized device that accurately measures lung functionality. This FDA approved technology is a smaller, more accurate device that has an addressable market size of over $1B.

A physician with over 40 years experience said about PulmOne’s product, “The PulmOne MiniBox will allow primary care docs to have them in their office and get paid for Pulmonary Function Tests rather then sending them out. Great idea. Primary care Physicians have very few procedures for which they can bill. It’s all about the money.”

Crosswise: Mapping users across devices for digital advertising

General advertising is a steadily growing industry with nearly $515B of annual expenditure. This market is poised to grow even more due to consumers increased use of multiple devices.

Crosswise leverages big data analytics to create a statistical correlation between one user and their many devices. Advertisers can now more accurately target relevant audiences on all of their devices instead of relying on the “spray and pray” method of advertising. This revolutionary technology will lower the cost of advertising and increase conversions by getting the right ads to the right people at the right time.

OurCrowd is joined by an impressive list of strategic investors in this round of investment in Crosswise.

Widely considered one of the most successful investors of all time, Warren Buffett attributes much of his success to his disciplined adherence to an investment formula. Primarily a value investor, Buffett sticks to a rigid set of parameters when evaluating investment opportunities. Given his success, it’s not surprising that over the years, so many have tried to emulate his investing style when making decisions about their portfolios. Difficult as this may be when assessing stocks, trying to apply his philosophies when evaluating startup investments is even more challenging.

Startup ventures typically have little or no income, making many of Buffett’s models for evaluating the intrinsic value of a company extremely hard to calculate. Furthermore, startups don’t have track records that can be studied to understand their stability. The result is that startup investors that seek to invest using Buffett’s principles, a.k.a Buffettologists, must rely on some of Buffett’s more qualitative parameters when assessing an early-stage company.

Outlined below are three Warren Buffett-inspired investment tips to help you identify promising startup investment opportunities.

1) Invest in a great team

One of Buffett’s core investment principles is investing in a great management team. While this may seem like an objective criterion, Buffett and other industry experts have come up with quantitative factors to gauge the likelihood of success in entrepreneurs. John P. Reese discusses in his book The Guru Investor that Buffett looks for companies with a 10-year average ROE (return on equity) of at least 15%. According to Buffett, this metric is a direct indicator of how capable management is of handling their company’s finances. Anything less is a sign to Buffett to stay clear of that company.

For example, Facebook Inc (NASDAQ:FB), who floated their shares on May 18th, 2014, just hit that magic number of 15% ROE. If they could manage to retain that number over the course of the next few years, they could potentially become a candidate for investment from Warren Buffett.

Investing in serial entrepreneurs is another way to help identify potentially successful startups. According to a study published in the Harvard Business Review, experienced entrepreneurs (failed entrepreneurs included), have a much higher predicted success rate then first time entrepreneurs.

When you invest in a startup, you invest in the company’s management. Finding a company with responsible, experienced leaders meets the Buffett standard for investing in a great team.

2) Invest in what you know

Warren Buffett is known for investing in companies with simple businesses models. Companies like The Coca-Cola Co (NYSE:KO), Wal-Mart Stores, Inc. (NYSE:WMT) and Exxon Mobil Corporation (NYSE:XOM) are all great examples of these easy to understand companies from the Buffett portfolio.

This basic Buffett investment strategy has been applied to angel investing and has even been statistically proven to improve ROI in startup investing. The Kauffman Report, which was the largest research report on angel investing, found that investment multiples were twice as high when angels invested in industries that they were familiar with. Expertise in a specific industry helps investors differentiate between the truly remarkable companies from the simply ordinary. Peter Lynch, renowned stock investor and ex-manager of Fidelity’s Magellan Fund, coined the investment mantra “invest in what you know,” to help investors identify undervalued stocks in their industry of expertise.

Investing in companies with simple business models means that it is easy to understand how they will make money, which leads us to our next tip.

3) Find companies with recurring revenue

One measurable metric that Buffett requires of all his investments is recurring annual revenue and clear earnings predictability. One sure way for a company to generate recurring revenue is by selling a product that addresses a huge market with perpetual demand. Take razor blades for example. In 1989, Berkshire Hathaway purchased $600 million of preferred stock in Gillette, a leading manufacturer of shaving razors. Gillette was acquired by Procter & Gamble Co (NYSE:PG) in 2005 for $57 billion, valuing Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s stake in Gillette at a humble $4 billion.

Today’s startup/tech equivalent would be software as a service (SaaS) technologies that usually charge their customers based on a monthly subscription fee. Monthly recurring revenue (MRR) is a great way to show potential investors a consistent source of revenue as opposed to relying on large individual sales. As a startup investor, look for companies that can present solid (and simple) business plans that provide clear earnings predictability for the future.

Startup Investment Platforms

While startup investing hasn’t been a typical Buffett investment, it has managed to garner the interest of like-minded “value investors.” Jon Medved is a serial entrepreneur and professed value investor. His latest company, OurCrowd is a platform that provides accredited investors with unprecedented access to investments in innovative technology startups. The investment opportunities available on the OurCrowd platform are all pre-screened by Medved and his team of veteran startup investors and analysts. The platform also offers professionally negotiated deal terms and due diligence summaries to help educate investors and mitigate some of the risk involved in startup investing. OurCrowd is introducing a whole new asset class to value investors and revolutionizing the way people manage their investment portfolios. You can learn more about OurCrowd by visiting OurCrowd.com.